Fuel bubbling from the gap between the crank case and the cylinder head is indicative of head gasket failure. Send the engine in to Hobby Services for warranty and they should make it right for you.

Edit: This is also evidenced by the hot running condition of the engine. The cylinder head gasket is allowing air to leak into the combustion chamber causing the engine to run in an overly lean condition (too much air vs. fuel). This makes the engine very difficult to tune, you are quite fortunate if you've been flying with this engine.

I had a similar problem with a GMS engine. The head gasket was leaking, so I replaced it. I was tuning the engine back in after getting the cylinder head re-sealed when the connecting rod broke. Hobby Services simply sent me a brand new engine.